Sensex rises 566 points to touch all-time high of 2,8784.67 on Tuesday; Experts says rally has legs
The Indian bourses on Tuesday hit all-time highs on short covering and strong buying by foreign institutional investors (FIIs). While the net FII buying stood at Rs 1,275.59 crore, domestic institutions were net sellers at Rs 761.60 crore.
Sensex rose 522.66 points (1.85%) to reach 2,8784.67 and Nifty ended the day with gains of 144.90 points (1.69%) to, 8695.60 led by metals and banks which rose 3.03% and 1.84%, respectively.
The US President Barack Obama's India visit, the prospects of European Central Bank announcing another round of stimulus in its meeting on January 22 and hopes of positive vote in Greece elections on January 25 led to the rally, experts said.
Growth expectations by International Monetary Fund (IMF) going through March 2017 also fuelled the euphoria.
It took Sensex 37 trading sessions to breach its previous record high of 28693.99. About 199 stocks hit their 52-week high level on Tuesday as investor wealth gained by 89,000 crore.
Among the blue-chip stocks that touched their 52-week high mark were Axis Bank, HDFC, HDFC Bank, ICICI Bank and Tata Motors.
The BSE 100 stocks gained by 1.42% outperformed the midcaps (+0.44%) and the small caps (+0.41%).
The Sensex has gained 3.3% this month and trades at 15.8 times projected 12-month earnings, compared with the MSCI Emerging Markets Index's multiple of 10.6.
A K Prabhakar, an independent market analyst, said, "The proposed visit of Barack Obama to India has helped build expectations of an improved business relations with the US."
As per market experts, ECB president Mario Draghi will probably announce a 550 billion-euro ($638 billion) quantitative easing programme this week.
Prabhakar said the better-than-expected Chinese growth rate at 7.4% helped lift the metal stocks in expectation of an increased demand from China.
Siddharth Bhamre, head-equity derivatives at Angel Broking, sounded a note of caution, saying one should maintain a wait-and-watch mode.
He said the FIIs are buying and domestic investors are careful means the stronger hands are buying and weaker hands are cautious.
G Chokkalingam, founder & managing director, Equinomics Research & Advisory Pvt Ltd, said today's rally was sector-specific and not a broad-based.
Amar Ambani, head, research at IIFL, US president Barack Obama's State of the Union speech later today (late Tuesday evening) and Greece elections later this weekend are global factors which could decide the broad direction in coming days. "The bull run is here to stay and any correction should be used to add meaningful positions."
Vinod Nair, head-fundamental research, Geojit BNP Paribas Financial Services Ltd, said January series was likely to be volatile and saw a pre-budget rally if global events panned out as per investor expectations.
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